Westpac takes bigger bite of insurance pie

Westpac
is leading a charge by the major banks into the general insurance market as it cross-sells products such as mortgages and personal loans to offer cheaper insurance.

The strategy has proven particularly effective in flood-ravaged Queensland where home and contents premiums have rocketed in many areas.

Of the customers who have a mortgage with Westpac in Queensland, the number of those who also insure with the bank has increased to 26.1 per cent from 21.6 per cent over the past three years, according to Roy Morgan data compiled for The Australian Financial Review.

The percentage of Westpac mortgage holders who also insure with the group across Australia has grown from 15.9 per cent to 20.7 per cent since 2010, the survey of more than 6000 Westpac customers shows.

“It is very much the result of an improved focus on cross-selling insurance products into the broader market base," the head of general insurance at Westpac wealth management arm BT Financial Group,
Jim Glossat
, said.

“There are discounts on premiums depending on the number of products you hold with the bank."

Mr Glossat said the refusal of insurer Suncorp to write new business in the flood-hit Queensland towns of Roma and Emerald presented Westpac with opportunities.

“Companies that are [declining] whole suburbs are definitely giving us an opportunity that can be taken advantage of with the correct pricing mechanisms," he said.

Related Quotes

Company Profile

“In any given town you will have 5 per cent flood risk but you will have 95 per cent of the area with no flood risk."

A Suncorp spokeswoman said the group was “happy with the performance" of its portfolios. “The absence of proper flood maps in many parts of Queensland led Suncorp to invest in data and technology to determine the most accurate premium based on individual risks," she said. “Other insurers haven’t done this, which explains why premiums can vary."

Flooding from ex-cyclone Oswald in Queensland have caused insurance losses of $553 million, data from the Insurance Council of Australia shows.

Despite the risk in catastrophe-prone areas, Mr Glossat argued that Westpac was pricing the risk “appropriately" and the sophistication of its pricing systems had improved significantly in recent years.

“It’s all about making sure the business you sign is coming on board at the right price," he said.

Commonwealth Bank
insurance analyst
Ross Curran
said the major banks were now offering attractively priced home insurance with their mortgage products.

“Customers to date have proven receptive of the packaged bank offering," he said. “This does pose a longer-term potential threat to the incumbent providers."

Credit Suisse insurance analyst Andrew Adams noted the banks were “always a threat" to insurers thanks to their large and loyal customer bases.

“But the banks are coming off from a very small base compared with IAG and Suncorp," he said.

About 25 per cent of CBA mortgage customers nationally also hold general insurance policies with the bank, and about 27 per cent in Queensland. Both figures however have gone backwards over the past three years.National Australia Bank, which has its insurance policies underwritten by Allianz, has increased the number of mortgage holders who also insure with the bank to 5.4 per cent from 4.4 per cent from 2010.